How to calculate MAO with the 70% rule, with a worked example

Your maximum allowable offer (MAO) is the most you can pay for a property and still make the deal work. For a wholesaler, "work" means two people make money: you, through your assignment fee, and the rehab investor who buys your contract. The 70% rule is the most common way to find that number quickly.

The formula

The 70% rule says a rehab investor should pay no more than 70% of the after-repair value, minus repairs. As a wholesaler you also need to subtract your fee:

1. ARV × 70%. The share of the finished value an investor can spend on purchase plus repairs.
2. Minus repairs. What is left is the assignable price, the most your end buyer should pay.
3. Minus your assignment fee. What is left is your MAO, the most you should offer the seller.

The remaining 30% is not profit. It covers the investor's holding costs, closing costs on both ends, agent commissions when they sell, and their profit. That is why the rule holds up as a quick screen.

A worked example

Say you are looking at a three-bedroom house. Renovated homes nearby have sold for around $200,000, so that is your ARV. Your walkthrough suggests $35,000 in repairs: a roof, a kitchen, flooring and paint. You want to keep $10,000 when you assign the contract.

1. $200,000 × 70% = $140,000
2. $140,000 minus $35,000 in repairs = $105,000, the assignable price
3. $105,000 minus your $10,000 fee = $95,000, your MAO

You can offer the seller up to $95,000. A rehab buyer paying around $105,000 still has room to make the project work. You can check this example, or your own numbers, in the free wholesale MAO calculator.

What happens if you overpay

Suppose the seller insists on $105,000 and you agree, planning to find a buyer at $115,000. Your rehab buyer now pays $10,000 more than the rule allows. Run that through the fix-and-flip profit calculator with real holding and selling costs and you will see the investor's margin shrink fast. Experienced buyers know this math too, which is why overpriced contracts sit in dispo until the deadline passes.

When to change the percentage

The 70% figure is a rule of thumb, and the right number depends on the deal:

• Use a lower percentage (65% or less) when the market is slow, the rehab is heavy, the home is high priced, or your ARV is uncertain.
• A higher percentage can make sense on light cosmetic work in a fast market where homes sell quickly and holding costs stay low.

Whatever you use, be consistent, and write down why you changed it. If your buyers keep passing at 70% in your market, that tells you something.

Common mistakes

Inflating ARV. The fastest way to break the formula. Use recent sales of renovated homes that are close by and similar in size, age and condition. An automated online estimate is not a comp.

Underestimating repairs. Repairs are subtracted dollar for dollar, so a $10,000 miss is a $10,000 miss in your offer. Add a contingency, and walk the property with a contractor when you can.

Forgetting your own costs. Marketing, earnest money at risk and your time are real. If your fee does not cover them across the deals that do not close, the business does not work even when individual deals do.

Treating the result as a promise. MAO is a ceiling, not a target. If the seller accepts less, take it, and leave the savings in the deal as a cushion for the surprises every rehab finds.

Keep the math with the deal

The offer you make on Tuesday matters again when the seller calls back three weeks later. In Deal Harbor, the Deal Analyzer runs on every deal page: enter ARV, repairs, the rule percentage and your fee, and it shows the full MAO breakdown plus a flip projection, then saves the result to the deal. The wholesaling pipeline guide shows where that number fits in the rest of the process, and Deal Harbor for wholesalers shows the setup. Plans are on the pricing page.